Federal Budget 2023: What is happening to the instant asset write off scheme?
The $20,000 tax break for tradies in this year’s budget — as ute’s popular write-off is scrapped
- Immediate depreciation of assets for deprecated utes
- Traditions can now buy $20,000 worth of tools on tax
The Australian traders will lose the right to buy a $65,000 ute and claim it back in taxes within a year, but they will now be able to spend $20,000 on tools and get generous treatment from the IRS.
Treasurer Jim Chalmers scraps his liberal predecessor Josh Frydenberg’s immediate write-off program, which expires June 30.
This program debuted in October 2020, allowing traditones battling lockdown restrictions to buy a $59,136 ute or van and claim it back within a year instead of eight.
This was adjusted to $64,741 last fiscal year to account for inflation, after the scheme was extended in the 2021 budget.
Typically, small business owners can purchase tools and machinery and claim them back from their taxable income over the life of the item, which can range from three years for a computer to decades for a factory machine.
But in Tuesday night’s budget, Dr. Chalmers announced a scaled back immediate asset write-off program that would allow small businesses with $10 million in annual sales to spend $20,000 on tools or equipment — multiple times — from July 1, 2023, to June. 30, 2024.
The Australian traders lose the right to buy a $65,000 ute and claim it back in tax within a year – but they can now spend $20,000 on tools and get generous treatment from the IRS
They will be able to write it off against their taxable income in one year, rather than having to wait several years to write it off, provided those items are used or installed in fiscal year 2023-24.
Small businesses would also write off multiple assets directly, provided each cost less than $20,000.
“The budget we are presenting to the Australian people tonight lays the foundations for growth by embracing clean energy and investing in value-adding industries, people, skills, technology and small businesses,” said Dr Chalmers.
“In this budget, we support Australian small businesses with an immediate asset write-off of $20,000.”
The program — known as the “Small Business Support — $20,000 Immediate Write-Off of Assets” program — was expected to cost the budget $670 million in 2024-2025, when traditionalists file their tax returns for the prior fiscal year.
For assets valued more than $20,000, trades and small business operators can depreciate the asset by 15 percent the first year on their tax returns, and by 30 percent each year thereafter.
Small businesses can also spend $20,000 on linking their heating and cooling to solar or renewable energy, upgrading to more energy-efficient refrigerators and induction cooktops, and installing batteries and heat pumps.
These items can be claimed for tax during the life of the item – as part of the Small Business Energy Incentive – provided companies making the claim have sales of less than $50 million.
This was expected to cost the tax office $260 million in 2024-2025.
The scheme is not available for electric cars, renewable electricity generation assets, capital works and equipment that is off the grid and uses fossil fuels such as petrol.
Tradies can no longer buy a $64,741 ute (Ford Ranger pictured) and get it back from taxes within a year